Apple Worrying Investors, Eying India

According to Strategy Analytics’ latest report, during the second quarter of the year, tablet shipments grew 43% over the year to 51.7 million units. While tablet sales were still strong, growth has slowed significantly from the 116% reported a year ago in the same quarter. While the iPad remains synonymous with tablet devices, sales have also begun to slow as the less expensive versions available on the Android OS are taking over the market. The report showed that Android-based tablets now account for 67% of the global tablet market, while Apple commanded a comparatively lower share at 28%.

Apple’s Financials
Apple’s (Nasdaq:AAPL) Q3 revenues grew 1% over the year to $35.3 billion, marginally ahead of the market’s projected revenues of $35 billion. EPS of $7.47 fell 22% over the year but surpassed the Street’s projected target of $7.31 for the quarter.

During the quarter, sales of iPhones grew 20% over the year to 31.2 million units, a record for the June quarter. Sales of the phone were, however, muted compared with the previous quarter’s sales of 37 million units. Tablet sales fell 14% over the year to 14.6 million units. Sales of Macs also registered a decline from 4 million units a year ago to 3.8 million units during the quarter.

By segment, revenues from iPhones grew from $15.82 billion to $18.15 billion. iPad revenues registered a large 27% decline from $8.78 billion to $6.37 billion for the quarter. Mac sales remained relatively flat at $4.89 billion. iPod sales for the quarter continued to decline from $1.06 billion a year ago to $0.73 billion. Revenues from Apple’s digital store grew 25% to $3.99 billion while revenues from accessories fell 4% to $1.18 billion.

By region, revenues from America saw strong growth of 12% to $14.41 billion. Europe’s continued recession hurt sales in the region, with revenues declining 8% to $7.61 billion. Revenues from Greater China fell 14% to $4.64 billion. Sales in Japan registered strong 27% growth to $2.54 billion. Revenues from rest of Asia fell 35% to $2.05 billion.

Apple’s New iPhone

To counter the slowdown in growth rates for tablet and phone shipments, Apple needs to release a new product soon. Many believe that Apple’s ability to innovate has been missing since the loss of its founder, Steve Jobs. Product releases since his passing have been merely enhancements of existing features and have not been groundbreaking. But market rumors suggest that this may be about to change. Apple is said to be developing a new iPhone that will come with biometric capabilities such as a fingerprint sensor. The phone will become more secure and is likely to operate only when initiated by the user’s fingerprint. As usual, Apple has neither confirmed nor denied such speculation.

Analysts also believe that Apple may be working toward a less expensive iPhone version, which would help it attract a bigger share in the emerging markets. According to IDC, within Europe and the US, smartphone sales grew a comparatively meager 14% over the year. Till a year ago, these growth rates were in excess of 50%. Since most residents of these countries already have smartphones, capturing the emerging markets will ensure continued market growth. Markets like India are still growing at more than 50% and have populations where 90% of users still use simpler-feature phones. Apple has only 3% share of the phone market in India, and lowering prices through discounts and other trade-in options have helped grow sales by over 400% there. Releasing a less expensive model should attract a bigger market share in such markets. Analysts expect the rumored iPhone 5C to be one such phone. Apple is said to be reducing costs by manufacturing the phone in plastic instead of its typical metal casing and will make it more attractive by adding colors to the casing.

Apple Trying to Improve Maps
Earlier last year, Apple released its Maps offering without proper testing, resulting in a bug-infested app that caused severe embarrassment to the company and had to be pulled off the market. But since then, the company has been investing in ensuring that its app becomes a place of choice for people to go. Earlier this month, it acquired two start-ups to help update Maps. Terms of these deals were not disclosed.

One of these acquisitions was that of Toronto, Canada–based start-up, Locationary. Locationary is a location data company that uses crowdsourced information and an exchange data platform, Saturn, to collect and verify information on local businesses. The data available on Locationary is updated frequently to ensure that users do not encounter shuttered down businesses.

Apple also announced the acquisition of Hopstop.com, a public transportation navigation service. Hopstop’s app helps commuters figure out transit times and routes based on available public transportation systems. While Apple has not disclosed purchase figures, analysts estimate that Hopstop would have cost Apple close to the $1.1 billion acquisition price that Google paid for Waze. New York–based Hopstop provides public transit directions for more than 300 cities through apps based on iOS, Android, and web platforms.

Despite these measures, Apple’s stock still lingers at significantly lower levels since it touched a 52-week high of $705.07 in October 2012. It is trading at $453.32 with a market capitalization of $411.18 billion. Investors have lost their shirts on it over the last year.